How do you insure a driverless car? The biggest question facing motor insurance

Right now, the financial services sector is undergoing big changes – thanks to digital. Think of the rapid growth of online banking, contactless payments and even chatbots; in just ten years, the way we interact with our banks has completely changed.

And it doesn’t stop there: 72% of business leaders in financial services believe their sector will fundamentally change within the next five years, according to our Fit for Digital research.

But the sector is also being impacted by digital innovation in other areas. And one of the most interesting questions currently facing the insurance sector is the impact of driverless cars.

It’s an issue which will not only necessitate new ways of thinking, but could very quickly turn the whole model of insurance upside down. Because when it comes down to it, how do you insure a car with no driver?

So, what will be the impact of self-driving cars and what should insurers be doing right now to keep ahead of the curve?

Who insures a driverless car?

A key question thrown up by the development of driverless cars is where responsibility for insurance will lie.

It’s certainly true that we’re moving into uncharted waters, as at present insurers will rarely offer conclusive cover that stretches across the whole risk of owning a car: manufacturers will usually offer warranties for parts, while insurers cover driving on the road.

If the vehicle has an accident following an Advanced Driver Assistance System (ADAS), it’s unclear at present where the responsibility for the claim will fall.

The whole model of car insurance may be challenged by automated cars, and there is a huge opportunity for disruptors to challenge traditional systems.

Insurers should see that this is both a challenge and an opportunity, and appreciate that the maxim that ‘we have always done it this way’ can no longer apply.

We’re in the early days right now, but the insurers that can be agile enough to tackle this issue early will be the ones to win out as the market changes.

What about uninsured drivers?

Uninsured drivers have always been the bane of the motor insurance world, from leaving victims of accidents unprotected to driving up premiums for insured drivers.

One of the key struggles that insurers currently face is a lack of proximity to the customer and limits on the information that they can access. Opportunist fraudsters are able to make declarations to insurers that are not based on fact, which is the only reason they can get away with it.

With the growth of digital enablement, from telematics and connected cars right through to driverless cars, insurers are gaining access to more and more data on vehicles, owners and drivers and greater incident management.

As data exchange between the car, the driver and the insurer becomes more automatic, fraudsters will have to find other ways to manipulate information supplied to the insurers, which will absolutely become harder and harder as information becomes more robust and more verifiable.

Collaboration in the digital age will mean that we should get to a place in the future where it won’t be possible to run a vehicle on the road that isn’t insured or being driven by the right person, so automation will absolutely contribute to a fall in uninsured or incorrectly insured drivers.

Insurers should look to work with other parts of the supply chain to begin benefitting from this growth of digital – and should look to do this now.

Can a driverless car be hacked?

Cybersecurity is a serious concern for both consumers and businesses. We’ve seen documented incidents of vehicles being hacked, with criminals gaining potential access to the system controlling key functions of the vehicle including its direction of travel.

The risk of hacks may put many users off using ADAS, while businesses will face huge penalties in the event of cyber breaches through the upcoming GDPR legislation.

Securing driverless cars is not going to be easy; security is a complex area, and there are constant attempts to gain access to systems and data and thwart internal policies and/or processes.

It’s clearly imperative that any technology deployed in self-driving cars is secured and tamper-proof, and this must be a fundamental priority for manufacturers and insurers, even as driverless cars are in their infancy.

Winning the race

Driverless cars are set to transform a motor insurance sector that has existed for over a century.

But rather than prevaricating (or even panicking), insurers should move with the changes and be open to entirely new business models that complement and benefit from new technologies.

To insure driverless cars effectively, it may be beneficial to collaborate with manufacturers, technology specialists and even parts of the public sector, setting whole new paradigms for car insurance.

In this fast moving and exciting area, what is clear is that those insurers who are slow to respond will be left behind.

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